A DIFFERENT VIEW: Part II

Last time in our Small Bites blog we discussed the customer’s perspective and how it shapes the future of the business relationship. If you want to recap that article, here is a link to Part I.

This week we’re going to look at the challenges we face as owners and leaders when we get tunnel vision and forget what the customer is actually purchasing. It’s not just a product, it’s an experience, and the customer’s experience is the deciding factor as to whether or not we work together again in the future. But let’s face it, we still have a business to run…

Management Perspective: Challenges and Focus 

Unlike customers, business owners and managers are usually more focused on running the business: sales, profit margins, employee satisfaction, growth, and sustainability, etc. This narrow focus can result in priorities that differ from those of our customers. One huge obstacle in the value vs price battle is internal cost cutting. Cost cutting can be in important business function, but your customer should not be able to tell when and where you are cutting costs.

We have all likely seen the signs of cost cutting over the last few years, how much air is in that bag of potato chips? Have you counted the number of pickles they put in a pickle jar lately? When cost cutting is the focus the consumer tends to receive less product for the same amount of money. Where companies can’t cut cost because of limitations like size requirements, such as products sold by the gallon, they raise prices and most consumers are forced to shop around solely based on price. How much is that gallon of milk? How about a dozen eggs? This gas station has the cheapest fuel, even though it’s out of the way. For the customer this rarely feels good, but cost cutting will always makes sense to the brains in the accounting department.

Here’s some hard truth for you: It you plan to compete as the “low cost“ option, this is probably not the right place for you. Here we focus on delivering high value products that customers want and seek out, while creating profitable, sustainable companies who dominate in their industry. We focus on being the “high value service provider” not the “low cost option.” That being said, there’s nothing wrong with being the low cost option, there’s always a need for that, I like low cost items when I’m shopping at certain stores, or for a specific product, but I will still make my final decisions based on product quality. Competing on cost or price point is a fools game.

Operational Efficiency

A key concern for management is the demand of daily attention to inventory management, price control, staff scheduling, supply chain dependability, etc. Frequently, operational decisions are far disconnected from customer experiences. If you want to be the best steak house in town, but you purchase the cheapest frozen steaks you can find because it easy, your products are not in line with the expectations you are creating for your customer. If you are not investing in your customers or your business by purchasing the best supplies you can find, it won’t take very long for word to travel that you are not the best steak house in town, all your competitor has to do is buy better meat and they’ll be ahead of you in no time. I’m not saying overextend yourself but understand the balance between efficiency and effectiveness. They are not always interchangeable when pursuing a goal.

Financial Constraints

Every business must balance its books, and management should be acutely conscious of the need to produce revenue and manage expenses. Cash flow is frequently tight in small businesses and limits investment in new technology, service expansion, equipment and marketing. Focusing too much on pricing can lead to a lack of high-quality customer service due to limited resources and stressed management leading stressed teams. Financial constraints need to be managed and overcome, they can not become the long term driving factor for all decision making in the company. If you are not profitable you can’t re-invest in your business, your employee’s and your customers. We’ll talk more about cash flow in an upcoming blog. But for now, focus on what’s important to your customer and your reputation and don’t cut costs there.

Employee Staffing

Hiring, training, and retaining employees are common and significant problems for small businesses. Many business owners hire out of desperation during seasonal spikes or after an employee quits or is terminated. We are all guilty of hiring the wrong person because it was the easy option at the time. We’re not going to get into hiring right now but we are going to focus on training, culture and leadership as employee motivators that ensure customers are always having a positive and engaging experience. 

Although management might see staffing problems as a temporary hiccup, customers usually have little tolerance for poor service or mistakes when there are other businesses providing essentially the same products or services. Frequent turnover in customer facing positions can also raise red flags to the consumer, unless they have already noticed the employee is a poor performer then you probably waited to long and risked too much.

Don’t ever assume that your employees know what to do. Re-cap, retrain and communicate constantly the standards and the requirements of the job. Coach every step of the way. If you have a poor performer, ask them if the would like more training, better yet. Offer more training and commit to it. Remember, you have to coach the person (the human being) as much as you coach the employee. We’ll revisit that later.

Employee Compensation

Another issue we see is underpaying key employees. If you want to provide the best service, you need to have the best people. Usually the best people already hold positions in other companies. In order to have people like that on your team you need to offer something the others don’t. You can start with a good culture, reasonable work hours and every other weekend off, but eventually you’ll have to start competitively compensating in order to attract top talent. If you put your customers first you know they want the best, you need to have the best people in order to deliver. If you can offer a performance based pay program or profit sharing to your key people you will go far and they’ll will want to stay knowing that those who work well are well compensated. Equally important. Compensate your employees with respect and build a culture that invites and rewards top performers. What you accept is what you can expect. Don’t accept subpar performance from anyone and don’t compensate or reward poor performance in any shape or form.

Conclusion

The divide between what customers see and what management sees in a small business is the result of various experiences, perspectives, influences and priorities. Management must balance operational efficiency, potential financial constraints, and long-term growth objectives with the reality that customers value both the immediate experience and the long term results or benefits they receive from a business, and the products or services they provide. These two perspectives will always exist so at the end of the day, the customer’s perspective will matter most because the business will always require customers for it’s survival. The customer will always have a choice, so why should they choose you? If it’s your low price, best of luck to you. If it’s because the services you provide are high value and appropriately priced, you and your customers both win.

Ask yourself what you want to be known for in your industry, it will probably be something like “great food” or “great service” then make a list of what you consider to be the markers (KPI’s) for those things. Go visit or do business with the companies that you consider to be performing at that high level. Read their reviews, see what their customers are saying. Then take time for some self reflection. Maybe even ask your customers and your employees to complete an anonymous survey and see where you stand. You might be on the right track already. If not, we might be able to help. Regardless, solve a problem or fill a need for your customer and focus on doing this at a high level over and over again, and you’ll have a much higher chance of success.

~mb